UCP expects to IPO at a price-to-book discount from other homebuilders that have IPO'd this year, but is priced at a price-to-sales premium because 64% of Q1 '13 revenue is land sales rather than home and land sales.

UCP expects to sell 43% of the company on the IPO, which is a large percentage and suggests if UCP has to come back to the public market current investors may be diluted more than they expect.

This year's stock market has not been kind, to-date, regarding homebuilding IPOs. See this chart.

Conclusion

UCP may be good for a trade on the IPO, based on the current market value of its over 5,000 lots, that were acquired before the surge in real estate prices. It also might be a good acquisition candidate for a larger homebuilder to buy, based on its inventory of lots.

To put the above conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced earlier:

Business

UCP is a homebuilder and land developer, with significant land acquisition and entitlement expertise, in growth markets in Northern California and with a growing presence in attractive markets in the Puget Sound area of Washington State.

As of March 31, 2013, UCP's property portfolio consisted of 48 communities in 17 cities in Northern California and the Puget Sound area of Washington State.

In Northern California, UCP primarily operates in three areas: the Central Valley area (Fresno and Madera counties), the Monterey Bay area (Monterey County) and the South San Francisco Bay area (Santa Clara and San Benito counties). In Washington State, UCP operates in the Puget Sound area (King, Snohomish, Thurston and Kitsap counties).

Sales

In 2012, UCP sold 41 homes and 560 lots located in 10 communities in California and Washington State and in 2011, UCP sold 33 homes and 118 lots located in seven communities in and around the Central Valley area, the South San Francisco Bay area and the Monterey Bay area of California.

Owned or controlled lots

As of March 31, 2013, UCP owned or controlled 5,061 lots, which approximated an eight-year supply of land based on home and lot sales for the 12 months ended March 31, 2013.

UCP expects that homebuilding and home sales will constitute the primary source of revenue growth.

Significant Land Position Acquired at Low Cost Basis

Substantially all of the real estate inventory of 5,061 lots as of March 31, 2013, was aggregated since 2008 at what UCP believes are attractive prices.

Land value appreciation

In the Fresno County market, where UCP had two active communities as of March 31, 2013, the median price of single-family detached homes increased approximately 19.7% from March 31, 2012, to March 31, 2013, and the area experienced modest job growth of 1.7% from March 31, 2012, to March 31, 2013.

In the Santa Clara County and San Benito County markets, where UCP had two active communities as of March 31, 2013, the median price of single-family detached homes increased approximately 8.5% from March 31, 2012, to March 31, 2013, and the area experienced job growth of 3.2% from March 31, 2012, to March 31, 2013.

In the Monterey County market, where UCP had one active community as of March 31, 2013, the median price of single-family detached homes increased approximately 12.8% from March 31, 2012, to March 31, 2013, and the area experienced job growth of 3.2% from March 31, 2012, to March 31, 2013.

In the Olympia, Washington market, where UCP expects to open two new communities during the remainder of 2013, the median price of single-family detached homes increased approximately 6.7% from March 31, 2012, to March 31, 2013, and the area experienced modest job growth of 0.8% from March 31, 2012, to March 31, 2013.

Growth Plan

Grow Revenue by Increasing Community Count

As of March 31, 2013, UCP had five actively selling communities consisting of 290 lots, and expects to open nine additional communities during the remainder of 2013.

Organizational structure

The public entity is a shell, which owns UCP, LLC which owns the actual operating subsidiaries. This way the parent, PICO, has total operational control, because it has control and "manages" UCP, LLC.

Use of Proceeds

UCP expects to net $113 million from its IPO. The proceeds will be used to purchase shares in UCP, LLC, which will use the proceeds for land development, home construction and other related purposes for the operating subsidiaries.

Disclaimer: This UCP IPO report is based on a reading and analysis of UCP's S-1A filing, which can be foundhere, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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